Home values in most major real estate markets will stop falling this year, according to the Zillow Home Value Forecast. Values in 19 of the 30 metropolitan areas included in the analysis are expected to hit bottom by the end of 2012—some already have. Several of them that have been especially hard hit, including Phoenix and Miami–Fort Lauderdale, will see significant value increases by next April. The national average also may hit bottom by the end of 2012.
The glimmer of a housing recovery is due partly to slowly improving unemployment figures, which are providing buyers with more confidence, as well as a rise in the cost of renting, which makes home buying more attractive.
Rents have increased in 70% of the metro areas covered by Zillow over the past year. Bottom line: With average US home values now back around late-2003 levels—down about 25% since the peak in May 2007—potential home buyers who have been reluctant to buy into a sinking market should take advantage of record-low mortgage rates and start shopping.
Important: The housing recovery will be modest as the US slowly works off its excess supply of homes, including homes that went through foreclosures. Markets in states that have a slower, more convoluted foreclosure process will continue to lose ground. These include Atlanta (predicted to lose 4.1% through March 2013) and Chicago (likely to lose 3.8%). But most other cities should see values rise between 1% and 3% annually through 2016 before resuming a more regular, long-term growth trend of 2.5% to 5% a year.
Markets where values are expected to reach their low point by the end of this year: Baltimore…Boston…Dallas-Fort Worth…Denver…Las Vegas…Los Angeles…Miami-Fort Lauderdale…New York City…Orlando…Philadelphia…Phoenix…Pittsburgh…Portland, Oregon…Riverside, California…San Diego...San Jose…St. Louis …Tampa…and Washington, DC.
Markets where values are not expected to bottom out yet: Atlanta…Charlotte…Chicago…Cleveland…Columbus, Ohio…Detroit…Minneapolis-St. Paul…Sacramento, California…San Francisco… Seattle…and Virginia Beach.
Source: Stan Humphries, PhD, chief economist at real estate information Web site Zillow.com, based in Seattle. The site estimates values of more than 100 million US homes.